CO129-440 - Others & Individuals - 1916 — Page 85

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until he has secured the contract. All this work, of course, is in addition to a splendid business organisa- tion at headquarters, and as efficient methods in China as prevail in Europe. For example, most of the larger engineering firms publish their own journals, which are well produced, contain interesting accounts of the work carried out by the firm, illustrated by photographs and translated into Chinese, and are just what is required to attract the Chinese buyer, who, as a rule, under- stands very little of the machinery he wishes to buy, and merely requires the cheapest machine to do a given work. It is often stated that, although the German firms have secured these large contracts, they have suffered losses on them, both by cutting down their margins to an unremunerative figure, and also by default of the Chinese. I am in a position to state that the largest German mercantile firms always calculated on making at least 10 per cent. on large industrial contracts in the interior, and frequently obtained as much as 15 to 25 per cent. Nor were the conditions These varied, of of payment particularly onerous. course, but the usual terms were one-third with the order as guarantee of good faith; one-third either upon shipment, or sometimes upon arrival of the plant in China; and the final third six to twelve months later. The payment of the final balance was some- times delayed, but cases of default have been extremely rare, and interest was paid on the overdue portion. In return for a concession as regards deferred payment, new orders for plant were frequently obtained as a quid pro quo. It must be remembered that the suppliers were merchant firms doing as wide and varied a China business as any British house, and their sole object was to turn over their capital as rapidly as possible and secure as full and safe a commission on each transaction as could be obtained. The question arises: What is the remedy, and how can we meet this competition and secure for British labour and capital its fair share of what is going to be a most important and rapidly expanding business as China develops her mining and industrial resources? The answer to this question, in my opinion, lies in the extension and more efficient organisation of our marketing system, and the

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meeting of our competitors on their own ground by methods better than theirs. It must be remembered that the benefits derived from securing contracts for electrical plant are cumulative, as many of the contracts stipulate that all further renewals and accessories shall be obtained from the original supplier. This probably accounts for the fact that one of the largest electrical manufacturing firms in Germany has carried on an enormous business in China through its own marketing organisation, which I know for a fact has lost money on each year's working, but has succeeded in securing such a hold of the business that it is prepared to continue work- ing, extending and organising, in the certain knowledge that its forbearance and effort will bear fruit in the near future, when China looms larger as a market for electrical machinery. If we wait until then it will be too late, but fortunately the present War is giving us a capital opportunity to take stock of our position, to realise our deficiencies in the past, and with the experience of our competitors always before us to so perfect our marketing organisation that the products of British manfacturing engineering enterprise will have every chance of competing on favourable terms in the markets of the interior.

There has been a growing conviction among British engineers for some time that, unless the present system of representation was modified, before many years are past they would find themselves almost completely excluded from the electrical and industrial machinery market of China, owing to the paucity of British merchant houses interested in the trade, and the fact that even these firms mainly confined their attentions to business brought to them by their native clients in the open ports. This conviction was very largely justified, and has been reflected by the formation of groups of manu- facturers who have combined, either to carry on the pioneering work in China in conjunction with the merchants, or to sell their own products direct to the Chinese. These groups are, without doubt, working in the right direction, and their energy and enterprise are deserving of all success, but such action would not have been required had the British merchant availed

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